Vote expectations and pre-electoral tariff cuts in Flemish municipalities

Using data covering 3 election moments (1988-2000) for 294 Flemish municipalities we examine whether the decision to cut tariffs before elections depends on the government’s expectations of staying into office. Election moments are central to both the political budget cycle literature and the strategic debt models. The combination of both theories could suggest that, at least in theory, both winning and loosing governments seem to benefit from pre-electoral tariff reductions and as such we expect to find a great many municipalities to engage into tariff cuts. The dataset however shows this is clearly not the case. We argue that the differences in the fiscal policy reaction of governments facing elections might have to do with their expectations of staying into office. In our analysis we make the decision to change tariffs dependent on the expected vote percentage of the government party (parties). As we do not possess reliable ex ante data on the perceived re-election probability, we estimate a vote-function to predict the percentage of votes. Our analysis shows that tariff reductions in election years are more prone when governments expect not to reach majority again in next elections

Strategic Debt in Flemish municipalities

This paper discusses the literature on strategic use of debt models and empirically tests the seminal models of Persson & Svensson (1989) and Alesina & Tabellini (1990) on a dataset of Flemish municipalities. The literature on strategic use of debt originates from the question whether incumbent policy makers run higher budget deficits if they expect an electoral defeat. We introduce a vote function to estimate the probability of electoral defeat and present evidence of strategic debt in line with Persson & Svensson (1989). Moreover, we show that coalition governments in particular are more likely to increase debt strategically

Politics and public infrastructure investments in local governments: empirical evidence from Flemish municipalities (1996-2006)

In this paper, we estimate a public infrastructure investment function using a panel data set of 307 Flemish municipalities for the period 1996-2006. We particularly draw attention to political determinants of public infrastructure investment decisions. We show that the characteristics of the government, such as partisan affiliation and fragmentation, affect the level of public infrastructure investments Local governments are also sensitive to the investment policy of neighbouring municipalities. There is a positive interaction effect that changes own investments by 20% of that of neighbouring municipalities. Finally, elections obviously have an impact on investment policy. Investments increase the nearer elections come, with highest investments in the year before elections

Vote expectations and pre-electoral tariff cuts in Flemish municipalities

Using data covering 3 election moments (1988-2000) for 294 Flemish municipalities we examine whether the decision to cut tariffs before elections depends on the government’s expectations of staying into office. Election moments are central to both the political budget cycle literature and the strategic debt models. The combination of both theories could suggest that, at least in theory, both winning and loosing governments seem to benefit from preelectoral tariff reductions and as such we expect to find a great many municipalities to engage into tariff cuts. The dataset however shows this is clearly not the case. We argue that the differences in the fiscal policy reaction of governments facing elections might have to do with their expectations of staying into office. In our analysis we make the decision to change tariffs dependent on the expected vote percentage of the government party (parties). As we do not possess reliable ex ante data on the perceived re-election probability, we estimate a vote-function to predict the percentage of votes. Our analysis shows that tariff reductions in election years are more prone when governments expect not to reach majority again in next elections

Credibility of fiscal policy and politics: an empirical assessment

In this paper we address the measurement and the analysis of credibility in fiscal policy. In many instances fiscal policy as conducted by governments is not perceived as credible, because the targets set forward by the government are often not met. Usually the divergence is on the negative side. Taxes are overestimated and spending is underestimated, leading to a deficit bias and growing indebtedness of governments. This paper focuses on a measure of credibility that builds on the deviations of the actual budget balances from the projections about these balances in the preceding year for 26 EU member states over the period 1999-2009.1 The objective is to extract from these data insights into the credibility of these governments’ fiscal policies and to explain credibility by a number of political determinant

New development : determinants of financial performance in public organisations

In the slipstream of NPM, public organizations worldwide have had to increase their financial performance by adopting management practices. Nonetheless, financial performance (FP) might be mostly predicted by contingencies that are not within direct managerial control. Drawing on evidence from 308 Flemish municipalities, this article shows that organizational and environmental contingencies affect FP, but a significant amount of variation in FP is unexplained-indicating that management could well matter